New offshore drilling regulations aimed at improving safety were created after the April 20, 2010, Deepwater Horizon disaster in the Gulf of Mexico.
Six years after the Deepwater Horizon offshore drilling rig explosion killed 11 men and caused a leak that dumped more than 4 million gallons of oil into the Gulf of Mexico, the Obama administration has issued regulations meant to prevent the next deepwater disaster.
“The well control rule is a vital part of our extensive reform agenda to strengthen, update and modernize our offshore energy program using lessons learned from Deepwater Horizon,” says Secretary of the Interior Sally Jewell in an April 14 announcement. The new rules, she says, incorporate “an intensive analysis of the causes of the tragedy, advances in industry standards, best practices, as well as an unprecedented level of stakeholder outreach.”
As of mid-May, industry leaders were still reviewing the new regulations to see if their concerns with the draft version had been addressed. But when U.S Rep. Garret Graves spoke to the Press Club of Baton Rouge on April 25, he had already made up his mind, saying the rules might “actually make offshore energy production less safe.”
Graves says the draft version of the rules would have resulted in up to a 35% reduction in offshore production, and a massive drop in offshore energy revenues for coastal restoration and hurricane protection in Louisiana, somewhere between $50 million and $80 million annually. The Gulf Economic Survival Team, a Louisiana-based industry group, says the original proposal could have cost the state some 32,000 jobs by 2025 and as much as $1.1 billion in tax revenue over the next 15 years.
“Safety in offshore operations is unquestionably paramount, but the new rules are more onerous than necessary and do not appear to provide an increase in safety in proportion to the additional burdens placed on the industry,” reads a statement from Gov. John Bel Edwards.
While Louisiana Oil and Gas Association spokesman Ragan Dickens agrees the new rules will lead to unnecessary delays and costs, he doesn’t believe they’ll have any impact on the safety of offshore drilling.
“Without safety, we simply cannot be a successful industry,” Dickens says. “So I don’t think a new piece of paper in the form of a regulation will make our industry more or less safe.”
BP’s “gross negligence” and “willful misconduct,” along with the negligence of Transocean and Halliburton, caused the 2010 disaster, according to District Court Judge Carl Barbier. So, advocates argue, why should everyone else have to suffer?
“At a time when the entire oil and natural gas industry is facing a historic downturn regarding prices, the last thing we need is new regulations that further stifle development,” Dickens says.
The rules will “ensure that oil and gas companies and offshore rig operators are cultivating a greater culture of safety that minimizes risk,” according to the federal Bureau of Safety and Environmental Enforcement. Key features include requirements for blowout preventer systems, double shear rams, third party reviews of equipment, real-time monitoring data and other reforms related to well design and control, casing, cementing, and subsea containment.
Citing its own economic analysis of available data, BSEE contends the new regulations will actually be cost beneficial for operators.
“The estimated overall cost of the rule (outside those costs that are part of the economic baseline) over 10 years will be exceeded by the time-savings benefits to the industry resulting from the revisions to the former requirements for [blowout preventer] pressure testing frequency for workovers and decommissionings,” reads the final rule. “In addition, the final rule will also produce benefits to society, both quantifiable and unquantifiable, by reducing the probability of well control incidents involving oil spills.”
While the Department of the Interior worked on the new rules for four years, industry stakeholders complain they were only allowed a few months to submit comments on them before being approved. “Now they are trying the same thing by providing only 90 days to begin enforcement of this new 500-page rule,” Graves says.
BSEE officials say they “listened extensively” to the industry stakeholders before issuing the final version. For example, the original proposal required a uniform “safe drilling margin” for all wells, which the American Petroleum Institute says would prevent drillers from making decisions based on the characteristics of each well, and potentially create unnecessary risks for workers and the environment. The final rules allow variation from the norm when justified by the operator, although it is unclear how those waivers will be reviewed or how long it would take to grant them.
BSEE also will require real-time monitoring of offshore operations by onshore experts and regulators, which the API worries will shift decision-making away from those closest to the well. But David Pettit, an attorney who has followed the rules for the Natural Resources Defense Council, says making data available to offsite company officials doesn’t necessarily mean they will overrule their people in the field.
Requiring two blowout protectors and “improving centralization of the drill pipe” so shears can more effectively cut through the pipe if needed are particularly important aspects of the new rules, he says.Pettit says the oil and gas industry seems to be arguing, as industries often do, that regulations should be voluntary and operators should be able to choose whether to use the more serious and intense protective measures or not. “API recommends them, but that doesn’t mean we need to do them in every situation,” is how he summarizes the industry’s point of view. “And the government said, ‘Oh yes you do.’”
After the Deepwater Horizon disaster, the federal government called for a temporary drilling moratorium and later enacted rules related to personnel safety, inspections and the ability to cap compromised wells on the ocean floor. Some industry spokespeople predicted doom for offshore drilling in the Gulf, but the industry came back strong. And despite predictions to the contrary, independents still could thrive in the post-Deepwater Horizon environment, as shown by the success of companies such as Covington-based LLOG Exploration Company.
Pettit says industries typically overstate the negative impact of new regulations. But after what happened in the Gulf in 2010, offshore drillers probably shouldn’t expect to receive the benefit of the doubt from federal regulators.
“I think the [new] rules are pretty good,” Pettit says. “It’s too bad that it took so long, but we got lucky in the sense that there wasn’t a major incident between Deepwater Horizon and today.”
NEW RULE RUNDOWN
In the form of a 531-page document issued on April 14, the Bureau of Safety and Environmental Enforcement finalized new regulations for offshore drilling aimed at improving safety. Compliance with some of the new rules will be required by mid-July, while others will be phased in over several years. Here’s a look at some of the new regulation requirements:
• Establishes minimum baseline requirements for the design, manufacture, repair and maintenance of blowout preventers.
• Requires more controls over the maintenance and repair of blowout preventers. An annual report will have to be completed on certain preventers regarding repair and maintenance records, documentation of equipment service life and assessment of the overall system. A complete breakdown and detailed physical inspection of the preventers will be required every five years.
• Requires the use of dual shear rams—which increase the likelihood a drill pipe can be sheared in an emergency—in all deepwater blowout preventers.
• Requires blowout preventer systems to include technology that allows the drill pipe to be centered during shearing operations. Some experts believe the failure of the Deepwater Horizon preventer stock to properly shear the drill pipe and seal the well was at least partially attributed to the fact that the drill pipe was not centered during shearing. Operators will have three years to comply with this provision.
• Requires more rigorous third party certification of the shearing capabilities of blowout preventers.
• Requires real-time monitoring capability for deepwater and high temperature/high pressure drilling activities. This also applies to shallow water operators involved in high risk operations.
• Establishes criteria for the testing and inspection of subsea well containment equipment.
• Increases reporting of blowout preventer failure data to the Bureau of Safety and Environmental Enforcement and the original equipment manufacturer.
• Adopts criteria for safe drilling margins consistent with recommendations arising from the Deepwater Horizon explosion.
• Requires the use of accepted engineering principles and establishes general performance criteria for drilling and completion equipment.
• Establishes additional requirements for using remotely operated vehicles to function certain components on the blowout preventer stack.
• Requires adequate centralization of casing during cementing.
SOURCE: Bureau of Safety and Environmental Enforcement